1 Question 1 Consider the following income statement to answer the question below 2015 2016 Revenue 60000 66000 COGS 42000 SG A 13000 EBIT 5000 Interest expense 1300 Income before tax 3700 Income taxes 1110 Earnings 2590 Forecast EBIT in 2016 using the percentage of sales method and choose the correct answer Status object Object 1 point EBIT 5,250 EBIT 6,000 EBIT 4,800 EBIT 5,500 2 Question 2 Consider the following income statement to answer the question below 2015 2016 Revenue 60000 66000 COGS 42000 46200 SG A 13000 14300 EBIT 5000 5500 Interest expense 1300 Income before tax 3700 Income taxes 1110 Earnings 2590 Suppose that interest expenses in 2016 will be 5 of total debt in 2015, and total debt in 2015 is equal to 30,000 The income tax rate is the same as in 2015 Forecast earnings in 2016 and choose the correct answer Status object Object 1 point Earnings 2,900 Earnings 2,800 Earnings 3,060 Earnings 3,000 3 Question 3 For the following question you will need the cash flow statement below 2015 2016 Earnings 2590 2800 Depreciation 1200 1260 Increase in working capital 200 670 Cash flow from operations 3590 Cash flow from investments 2500 Cash flow from financing 230 Net change in cash 1320 Cash flow from operations in 2016 is Status object Object 1 point 3,390 3,950 4,255 4,003 4 Question 4 For the following question you will need the cash flow statement below 2015 2016 Earnings 2590 2800 Depreciation 1200 1260 Increase in working capital 200 670 Cash flow from operations 3590 3390 Cash flow from investments 2500 Cash flow from financing 230 Net change in cash 1320 Suppose the company is planning a capital expenditure of 6,000 in 2016 Assume also that this company does not pay dividends Can the company finance this capital expenditure without issuing new external finance Status object Object 1 point Yes, because cash balances are sufficient to cover the difference between the capital expenditure and cash flow in 2016 Yes, but only if existing cash in the beginning of 2015 is greater than 1,290 No, because the capital expenditure is larger than the operating cash flow in 2016 No, because the company does not have sufficient cash to finance the capital expenditure 5 Question 5 Consider the following income statement and balance sheet to answer the question below Revenue 270000 COGS 230000 SG A 20000 EBIT 20000 Cash 4000 Short term debt 15000 Inventory 20000 Accounts payable 19000 Receivables 25000 Current Assets 49000 Current Liabilities 34000 The company's collection period is Status object Object 1 point 36 days 29 days 26 days 34 days 6 Question 6 Consider the following income statement and balance sheet to answer the question below Revenue 270000 COGS 230000 SG A 20000 EBIT 20000 Cash 4000 Short term debt 15000 Inventory 20000 Accounts payable 19000 Receivables 25000 Current Assets 49000 Current Liabilities 34000 Days in inventory are Status object Object 1 point 27 days 32 days 29 days 24 days 7 Question 7 Consider the following income statement and balance sheet to answer the question below Revenue 270000 COGS 230000 SG A 20000 EBIT 20000 Cash 4000 Short term debt 15000 Inventory 20000 Accounts payable 19000 Receivables 25000 Current Assets 49000 Current Liabilities 34000 The company's cash conversion cycle is Status object Object 1 point 38 days 35 days 24 days 21 days 8 Question 8 Consider a company with sales that are initially equal to 650 million a year (or 162 5 on the first quarter), and grow at a rate of 8 per quarter The company's profit margin is 7 so that COGS is equal to 151 1 in the first quarter (162 5 151 1 11 4 7 162 5) Inventory must be in place a quarter before the goods are sold All goods are paid in cash The company's cash flow in the first quarter is Status object Object 1 point 3 2 0 7 8 2 11 4 9 Question 9 Consider a company with sales that are initially equal to 650 million a year (or 162 5 in the first quarter) and grow at a rate of 8 per quarter The company's profit margin is 7 so that COGS is equal to 151 1 in the first quarter (162 5 151 1 11 4 7 162 5) Inventory must be in place a quarter before the goods are sold All goods are paid in cash The company's cash flow in the year is Status object Object 1 point 3 2 2 51 3 0 7 10 Question 10 Consider a company with sales that are initially equal to 650 million a year (or 162 5 in the first quarter) and grow at a rate of 8 per quarter The company's profit margin is 7 so that COGS is equal to 151 1 in the first quarter (162 5 151 1 11 4 7 162 5) Inventory must be in place a quarter before the goods are sold All goods are paid in cash True or false If the growth rate of sales goes up with no change in costs, the company will generate higher cash flow during the year Status object Object 1 point True False 11 Question 11 Consider the following example of the effect of seasonality in sales on cash flows First Quarter Second Quarter Third Quarter Fourth Quarter Receivables at start of period 45 Forecast sales 90 85 130 155 Collections Sales in current period (70 ) 63 Sales from last period (30 ) 45 Total collections 108 Receivables at end of period 27 Percentage sales collected this period 70 Total collections in the second quarter are Status object Object 1 point 87 27 94 85 12 Question 12 Consider the following example of the effect of seasonality in sales on cash flows First Quarter Second Quarter Third Quarter Fourth Quarter Receivables at start of period 45 Forecast sales 90 85 130 155 Collections Sales in current period (70 ) 63 Sales from last period (30 ) 45 Total collections 108 Receivables at end of period 27 Percentage sales collected this period 70 Suppose the company's total uses of cash are equal to 150 in the first quarter, 90 in the second quarter, and 95 in the third quarter The company starts the year with no cash reserves Which option best describes the firm's short term financial situation Status object Object 1 point This company will need to borrow money in the first two quarters to cover the difference between sources and uses of cash This company will need to borrow money in the third quarter to cover the difference between sources and uses of cash This company will not need short term financing during the year The company is not generating positive cash flow

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Question: 1. Question 1 Consider the following income statement to answer the question below. 2015 2016 Revenue 60000 66000 COGS 42000 SG&A 13000 EBIT 5000 Interest

Question 1

Consider the following income statement to answer the question below.

	2015	2016
Revenue	60000	66000
COGS	42000
SG&A	13000
EBIT	5000
Interest expense	1300
Income before tax	3700
Income taxes	1110
Earnings	2590

Forecast EBIT in 2016 using the percentage of sales method and choose the correct answer.

Status: [object Object]

1 point

EBIT = 5,250

EBIT = 6,000

EBIT = 4,800

EBIT = 5,500

Question 2

Consider the following income statement to answer the question below.

	2015	2016
Revenue	60000	66000
COGS	42000	46200
SG&A	13000	14300
EBIT	5000	5500
Interest expense	1300
Income before tax	3700
Income taxes	1110
Earnings	2590

Suppose that interest expenses in 2016 will be 5% of total debt in 2015, and total debt in 2015 is equal to 30,000. The income tax rate is the same as in 2015. Forecast earnings in 2016 and choose the correct answer.

Status: [object Object]

1 point

Earnings = 2,900

Earnings = 2,800

Earnings = 3,060

Earnings = 3,000

Question 3

For the following question you will need the cash flow statement below.

	2015	2016
Earnings	2590	2800
Depreciation	1200	1260
Increase in working capital	-200	-670
Cash flow from operations	3590

Cash flow from investments	-2500

Cash flow from financing	230

Net change in cash	1320

Cash flow from operations in 2016 is _______.

Status: [object Object]

1 point

3,390

3,950

4,255

4,003

Question 4

For the following question you will need the cash flow statement below.

	2015	2016
Earnings	2590	2800
Depreciation	1200	1260
Increase in working capital	-200	-670
Cash flow from operations	3590	3390

Cash flow from investments	-2500

Cash flow from financing	230

Net change in cash	1320

Suppose the company is planning a capital expenditure of -6,000 in 2016. Assume also that this company does not pay dividends. Can the company finance this capital expenditure without issuing new external finance?

Status: [object Object]

1 point

Yes, because cash balances are sufficient to cover the difference between the capital expenditure and cash flow in 2016.

Yes, but only if existing cash in the beginning of 2015 is greater than 1,290.

No, because the capital expenditure is larger than the operating cash flow in 2016.

No, because the company does not have sufficient cash to finance the capital expenditure.

Question 5

Consider the following income statement and balance sheet to answer the question below.

Revenue	270000
COGS	230000
SG&A	20000
EBIT	20000

Cash	4000	Short term debt	15000
Inventory	20000	Accounts payable	19000
Receivables	25000	______________	_____
Current Assets	49000	Current Liabilities	34000

The company's collection period is _______.

Status: [object Object]

1 point

36 days

29 days

26 days

34 days

Question 6

Consider the following income statement and balance sheet to answer the question below.

Revenue	270000
COGS	230000
SG&A	20000
EBIT	20000

Cash	4000	Short term debt	15000
Inventory	20000	Accounts payable	19000
Receivables	25000	______________	_____
Current Assets	49000	Current Liabilities	34000

Days in inventory are ________.

Status: [object Object]

1 point

27 days

32 days

29 days

24 days

Question 7

Consider the following income statement and balance sheet to answer the question below.

Revenue	270000
COGS	230000
SG&A	20000
EBIT	20000

Cash	4000	Short term debt	15000
Inventory	20000	Accounts payable	19000
Receivables	25000	______________	_____
Current Assets	49000	Current Liabilities	34000

The company's cash conversion cycle is ________.

Status: [object Object]

1 point

38 days

35 days

24 days

21 days

Question 8

Consider a company with sales that are initially equal to 650 million a year (or 162.5 on the first quarter), and grow at a rate of 8% per quarter. The company's profit margin is 7% so that COGS is equal to 151.1 in the first quarter (162.5 - 151.1 = 11.4 = 7%*162.5). Inventory must be in place a quarter before the goods are sold. All goods are paid in cash.

The company's cash flow in the first quarter is _______.

Status: [object Object]

1 point

-3.2

-0.7

8.2

11.4

Question 9

Consider a company with sales that are initially equal to 650 million a year (or 162.5 in the first quarter) and grow at a rate of 8% per quarter. The company's profit margin is 7% so that COGS is equal to 151.1 in the first quarter (162.5 - 151.1 = 11.4 = 7%*162.5). Inventory must be in place a quarter before the goods are sold. All goods are paid in cash.

The company's cash flow in the year is _______.

Status: [object Object]

1 point

-3.2

-2

51.3

-0.7

10.

Question 10

True or false?

If the growth rate of sales goes up with no change in costs, the company will generate higher cash flow during the year.

Status: [object Object]

1 point

True

False

11.

Question 11

Consider the following example of the effect of seasonality in sales on cash flows.

	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Receivables at start of period	45
Forecast sales	90	85	130	155
Collections:
-Sales in current period (70%)	63
-Sales from last period (30%)	45
--Total collections	108
Receivables at end of period	27

Percentage sales collected this period	70%

Total collections in the second quarter are ________.

Status: [object Object]

1 point

12.

Question 12

Consider the following example of the effect of seasonality in sales on cash flows.

	First Quarter	Second Quarter	Third Quarter	Fourth Quarter
Receivables at start of period	45
Forecast sales	90	85	130	155
Collections:
-Sales in current period (70%)	63
-Sales from last period (30%)	45
--Total collections	108
Receivables at end of period	27

Percentage sales collected this period	70%

Suppose the company's total uses of cash are equal to 150 in the first quarter, 90 in the second quarter, and 95 in the third quarter. The company starts the year with no cash reserves. Which option best describes the firm's short term financial situation?

Status: [object Object]

1 point

This company will need to borrow money in the first two quarters to cover the difference between sources and uses of cash.

This company will need to borrow money in the third quarter to cover the difference between sources and uses of cash.

This company will not need short term financing during the year.

The company is not generating positive cash flow.

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